Question

What are the five broad categories of institutional participants operate in the market:

Answer 1

The five broad categories of institutional participants operate in the market are :

1) Central banks and treasuries :

The main function of the central bank is to regulate the monetary policies and the the flow of money in the economy.They are responsible for managing the inflation and exchange rates of a country.They monitor certain rates that helps in regualating the econmony in times of recession or boom.

2)Foreign exchange brokers:

They facilitate the process of buying and selling of foreign currencies to traders by providing them access to a certain platform

3)Arbitrageurs and speculators :

Arbitrageurs take advantage of mispricing of securities by buying them in one market and selling them at a higher price in another. It is comparatively less risky activity compared to speculation , which involves certain assumptions about how a market is going to perform in future

4) Banking and non banking Foreign exchange dealers:

They profit from the bid ask spread i e from the difference between the bid and the ask price by buying and selling at different prices

5) Firms and individuals like importer and exporters, Mutual fund managers and investors, hedge fund manager and investors, etc who are  involved in cerftain commercial investment activities.